TSP Talk Blog

Welcome back. I hope you enjoyed your Labor Day weekend. The bulls will hate to see last week go as stocks did what they tend to do before a holiday - that is move against the more prevalent trend. The Dow ended Friday with a modest 39-point gain after drifting lower all afternoon from some larger gains. Small caps led while bonds were down.

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The Jobs Report came in lower then expected with 156,000 jobs added in August and an unemployment rate of 4.4%.

The Sunday night futures started out sharply lower after the news of North Korea's largest nuclear bomb test. The U.S. told the United Nations that Kim Jong-un is "begging for war." The futures slowly moved off those lows and after opening down 15.00 S&P 500 points, they were down less than 7-points by the open on Monday evening so the market is digesting this event.

I know I've beat the pre / post holiday reversals subject to death last week, but it actually played out so well that the concern now is, if the tendency continues, the larger downside trend would resume this week. And now we get the North Koreans poking us again so the market has a reason to see some profit taking from last week's rally. But, as we saw last week, the market fell sharply after the NoKo missile launch over Japan, but quickly found support and that triggered the rebound last Tuesday.

Volume should continue to be on the light side to start this week as the post-holiday vacations roll into the early part of this week, but of course any major geopolitical news could change that.

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The SPY (S&P 500 / C-fund) showed us a perfect example of a pre-holiday reversal last week as the larger downtrend ended and the index reversed counter to that trend. The question is, was that strength for real or just a pre-holiday reversal that will be erased this week? Technically, that open gap was filled near 243 and the market turned. That's classic action, but the holiday makes it all a little suspect.




The weekly chart of the S&P 500 doesn't show any damage being done as the rising trading channels remain intact.




The DWCPF (small caps / S-fund) exploded off the recent lows after successfully testing the 200-day EMA. I guess the question to ask is if it has come too far, too fast? A more manageable angle of incline may be between that new rising trading channel so I wouldn't be too surprised to see a pullback or sideways action putting it back into that channel at some point. There are a couple of small open gaps (blue) that could draw attention.




The Dow Transportation Index also performed well but it isn't completely out of danger yet. 9500 would be a nice level as it would make a higher high.




The QQQ (Nasdaq 100) actually made a new high last week. It pulled back slightly on Friday but came to test at the prior high. The top of that bull flag is a possible pullback target as well if it can't hold the new highs.




The EFA (EAFE Index / I-fund) posted a slight gain on Friday but closed off its highs, although it broke above, and remained above, its bear flag. The dollar was up on the day causing some lag in the I-fund.




The High Yield Corporate Bond Fund tested the prior highs and is now at a point where we could see new highs, but double tops tend to cause pauses in the upside so it will be a test.




The AGG (Bonds / F-fund) was down fairly sharply on Friday after the jobs report, but the bond futures rallied over the weekend after the North Korea bomb test.




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Thanks for reading. We'll see you back here tomorrow.

Tom Crowley


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